Ebay’s Strategy in China: Alliance or Acquisition Essay
In December 2006. eBay Inc. . a US company that offered e-commerce. e-payments and cyberspace communicating services globally. announced its program to organize a joint venture with China-based on-line portal and radio operator. TOM Online. in which eBay would hold 49 % ownership. 1 The move reflected the increasing troubles foreign internet companies were confronting in their efforts to snap a portion of the Chinese market amid ferocious competition and a altering market environment.
eBay foremost set pes in China in 2002 by geting 33 % involvement in EachNet—a domestic online auction company. followed by a full acquisition in 2003. 2. 3 In 2005. eBay acquired Skype4 to spread out into the on-line communicating sector. While Skype was a entirely owned subordinate of eBay globally. it operated indirectly in China via a joint venture with TOM Online. Due to this bing relationship between the two companies. 5 TOM Online seemed to be a natural pick of spouse for eBay’s subsequent determination with respects to its on-line market place concern. Recognizing TOM Online’s local cognition and political connexions. eBay believed that a joint venture would profit its neglecting concern in China and assist the company farther develop its Chinese market. 6 Some analysts questioned whether political connexions entirely were the reply and suggested that eBay focal point on its merchandise and service offerings. 7 1
Vara. V. and Chao. L. ( 20 December 2006 ) “EBay’s China retreat high spots a tough market” . Wall Street Journal. eBay ( Date Unknown ) “eBay and EachNet Team Up in China” . Press Release. hypertext transfer protocol: //investor. ebay. com/releasedetail. cfm? ReleaseID=74802 ( accessed 27 April 2007 ) . 3
After the full acquisition in 2003. eBay operated under the name of eBay EachNet. 4
Skype is a peer-to-peer package plan that allows people to do free calls over the cyberspace to anyone who besides subscribes to this service. Skype provided peer-to-peer cyberspace telephone service—ie. instant messaging and online telephone service. In 2005. eBay acquired 49 % interest in Skype China. with TOM Online having the remainder. Beginning: Schwankert. S. ( 20 December 2006 ) “EBay to replace Chinese auction site with JV” . ITworld. com. hypertext transfer protocol: //www. itworld. com/Tech/2403/061220ebay/ ( accessed 27 April 2007 ) . 6
Bradsher. K. ( 22 December 2006 ) “With TOM Online. eBay additions Chinese clout” . International Herald Tribute. 7
Rein. S. ( 24 December 2006 ) “TOM Online Must Focus on Merchandises: Connections Don’t Ensure Success” . SeekingAlpha. hypertext transfer protocol: //china. seekingalpha. com/article/22946 ( accessed 20 June 2007 ) . 2
Isabella Chan prepared this instance under the supervising of Prof. Zhigang Tao and Dr Jiangyong Lu for category treatment. This instance is non intended to demo effectual or uneffective handling of determination or concern procedures. This research was partly supported by a grant from the University Grants Committee of the Hong Kong Special Administrative Region. China ( Project No. AoE/H-05/99 ) .